“The housing market needs help to supply, not help to buy and the extension of this scheme is very dangerous,” he said. “Government guarantees will not increase the supply of homes, but they will drive up prices at a time when it seems likely that house prices are already over-valued.

“When the scheme is withdrawn any rise in prices that has taken place will be undermined, with potentially disastrous results. There is a real risk that the housing market will become dependent on the underwriting by government, making it very difficult politically to shut the scheme down.”

Mr Leach added: “This should be of great concern. The world must have gone mad for us to now be discussing endless taxpayer guarantees for mortgages.

“Instead of trying to pump-up prices, the Government should focus on relaxing planning laws and reducing Local Authority charges on developers to make it easier to build more homes.”

Extending Help to Buy aims to boost mortgage availability by reducing the risk for lenders, and will cover both existing and newly-built homes.

Guarantees will only be available to borrowers who can afford the mortgages, while those with impaired credit ratings will be excluded, the Treasury insisted. It will include income checks and stress testing.

Guarantees will also not be available for second home purchases, and lenders will be required to collect a declaration stating that the borrower has no interest a property anywhere else in the world. It will not be able to be used in conjunction with another state scheme.

Lenders will pay a fee to use the guarantee, based on loan-to-value banding.

The guarantee will be available on homes worth up to £600,000. The state will offer guarantees totalling up to £12 billion on £130 billion of high loan-to-value mortgage lending.

The initial equity loan stage allows people to buy a new-build home worth up to £600,000 with a Government loan of up to 20 per cent, interest-free for five years.

However, the guarantee plans have been widely criticised for risking inflating another housing bubble and piling huge housing risk on the Government.

Former Bank of England governor Lord King warned that the scheme is "too close for comfort" to a general scheme to guarantee mortgages.

The Bank's deputy governor, Paul Tucker, also warned that it would be "unwise" as a medium or long-term scheme.

"This is not a market that needs a permanent subsidy," he said recently. "They (home loan guarantees) are devices for getting out of a hole to dig another one for the future."

Mr Osborne said: "I'm determined to back people who want to do their best for their families. Help to Buy is about getting behind those who aspire to own a home.

"The mortgage guarantee will support an increase in high loan-to-value mortgages for people who can't afford large deposits, and it will also boost housebuilding. As of today lenders have the detail they need to go away and get ready for next January's launch."

Mark Clare, CEO of Barratt Housing: “There is no doubt that the Help to Buy scheme is boosting housebuilding by tackling one of the most significant issues - a lack of mortgage finance.

"The number of homes we build is already up over 20 per cent on two years ago and reservation rates have been running significantly ahead of the previous year, since the Chancellors announcement of Help to Buy."